Tax Bracket Question
 

My taxable income fell in 22% bracket. Yet HR Block tax software indicated my total tax owed at about 15% of my taxable income. I took the standard deduction only. What am I missing?

You don't pay 22% on your entire income, so 15% sounds correct.

Example using 2024 brackets.
10% on $11,600
12% on the portion $11,601 to $47,150
22% on the amount over $47,150 (up to $100,525)

https://equitable.com/tax-strategies...ctive-tax-rate

As an HRB user I'll take a stab at this. I assume you are talking 2024?
In USA we enjoy a progressive income tax structure. The more you make, the more you pay.
Your first taxable 23k is taxed@10%
Your next taxable 70K is taxed@12%
Your next taxable 106K is taxed@22%

I think you are seeing an average.

I could be wrong. But my answer is worth the price you paid.

It's too early to be calculating taxes for 2024. I think the OP is referring to 2023. But, yes, taxes are paid in brackets, so you have several different tax rates. It sounds like 22 percent is the OP's highest bracket, or marginal tax bracket. But, the total income tax would be less than the marginal rate.

"It's too early to be calculating taxes for 2024"

Wow!

Everything else spot on.

The OP mentioned his total tax owed. Since 2024 is not complete, he could not be calculating his total tax owed for 2024. More, if he is attempting to calculate his 2024 taxes and is in the 22% bracket by early September then he will owe more than 15% by the time the year is over. Plus, he said he was using the HR Block software but the software for 2024 taxes has not been released yet.

So what was the exclamation, "Wow!" about?

This is mid-September 2024. The 2024 tax return is not due until April 15, 2025. The OP refers to the H&R Block tax software, which is not even available to purchase for 2024 until November, 2024. So, how is he using it now?

I am referring to 2023 taxes.

How old are you?

In case on Medicare, the OP needs to factor in the IRMMA payments.

SSA - POMS: HI 01101.020 - IRMAA Sliding Scale Tables - 01/04/2024

If younger than 73, talk to your financial guy about Roth conversions.

2024 Tax laws in place. IRS brackets established. December 31 is what counts. H&R is just a conduit. OP was just asking about marg vs effective rates sparky.

Might want to reread posts #1 and #8 champ.

Doesn't matter to the question posed, IRMMA starts at the next track above 22%
and the person indicated that he was in the 22% tax bracket. .

details matter.

And if the OP is below 65 and purchases health insurance through Obamacare, he/she needs to consider how reported gross income will affect tax credits to subsidize said insurance. Although, in the 22% marginal tax bracket, the OP probably wouldn’t be eligible and is paying the full load.

The explanation between marginal tax bracket and actual percentage owed, in the first few posts, is spot on.

CoachKandSportsguy,

You are right. Details do matter. So? What do you mean?

IRMAA is based on AGI. This is a good time of year to start thinking about IRMAA and doing something, if you can, to avoid crossing that threshold into higher Medicare costs. Some people will use QCDs to do that. Others might time when it is worth taking a capital gain.

As we know, IRMAA kicks in two years later, and the 2026 IRMAA numbers are not out yet, so all we can do is guess what 2026 will bill us for our Medicare based on 2024 AGI.

Sometimes there is no way to avoid IRMAA. I think it is especially unfair to single people. Married couples get a lot more room to maneuver their AGI to avoid IRMAA.

Altavia is correct in spotting the possible need for the OP to try to factor in IRMAA. Whether that is the reason for the OP's question is not clear. But being aware of IRMAA now and planning to stay below the threshold can save a lot of money -- two years from now.

Altavia is also right in saying to look into Roth conversions if under RMD age. Check those tax brackets and do it if you can.

To those who commented that it's too early -- Nope!

Boomer (who is not an accountant)

This is why I am happy to pay our cpa to figure it all out and keep me out of trouble